Addressing criticism of government investment in clean energy innovation

The President’s “call to action” on a comprehensive clean energy strategy is a welcome development, and builds on the Administration’s extensive support for the clean energy industry.  During the Obama administration, the transportation, efficiency and renewable electricity sectors have all seen tremendous success despite a punishing recession.  From the start of 2009 to the end of 2010:

  • The wind industry added 15 gigawatts of capacity, increasing total capacity by 60%
  • Solar power doubled its aggregate capacity. 
  • 300,000 low-income homes were weatherized. 
  • And, the U.S. has become a hub for battery manufacturing for electric vehicles. 

These examples, and many historical ones, demonstrate the powerful impact of targeted and strategic government investment in an energy sector that is rife with inefficiency, market failures and barriers to entry for emerging technologies. More recently, bookshelves worth of white papers, reports, documents and strategy memos have been published (I can go on) , all arguing the same basic concept – that investment in clean energy innovation has historically been too limited, that our current situation requires we make this funding a priority and that government support, in conjunction with the private sector, can help to alleviate this shortfall.**

Unfortunately, despite the wide-ranging evidence in support of these conclusions, others continue to argue the opposite.  Two recent events seem indicative.  On Tuesday night, speaking about the role of government, U.S. House Budget Committee Chairman Paul Ryan stated:

“Depending on bureaucracy to foster innovation, competitiveness, and wise consumer choices has never worked” 

Actually, railroads, satellites, lasers, the Internet, and energy technologies (such as nuclear, coal and natural gas) have all benefited and prospered from a wide range of government support.  This is not to argue for heavy government intervention in all aspects of a technology’s development, only that specific gaps and market failures exist in the energy sector which can be optimally addressed by the government. 

Prior to Ryan’s comments, the “Spending Reduction Act of 2010 (HR 408) was introduced last week, promoted by the Republican Study Committee, that proposes to cut $2.5 trillion in spending over the next 10 years mostly by holding non-discretionary federal government spending to 2006 levels through 2021.  Setting aside issues with this approach, ten clean energy-related programs are eliminated in this Act, in a manner that seems both arbitrary and ineffective, given that the programs they seek to cut are ones viewed by experts as being successful examples of good government investment.  As the Obama Administration has so far done a solid job in targeting its investment in clean energy innovation, it makes this effort that much more disappointing. 

My colleagues speak to the efficiency and transportation/transit cuts, which represent most of the clean energy cuts [which I’ll link to later].  Kate Gordon at CAP delivered an excellent critique of many of the proposed clean energy cuts here, and I’ll just add a couple additional notes below.

“Applied Research at Department of Energy” would be eliminated under this act, putting a host of valuable programs and technologies at risk.  Applied research is one of the most important of Department of Energy (DOE) activities, translating basic pure research into practical real-world ideas and technologies that investors can finance and entrepreneurs build companies around.  Done poorly, this could decimate key programs, at DOE, stifling critical research in clean energy technology. 

The Manufacturing Extension Partnership (MEP) program would also be eliminated, thus ending, at a most inopportune time, a program dedicated to improve the global competitiveness of small U.S. manufacturers.  Studies have shown the MEP program pay for themselves and can greatly improve client productivity.   

These two cuts, and Ryan’s comments above, are prime examples of what I hope not to see in the coming months.  Both of these initiatives add value far beyond their cost and seek to solve complex and important challenges.  Moreover, these kinds of cuts – and ignoring the role of government in innovation – have the potential to cause serious damage to America’s future economic health and global competitiveness.  We should absolutely address our deficit, but let’s not cut potentially transformative clean energy programs that won’t have even a superficial impact on spending in the process.


**We would also argue the need for complementary policies in addition to R&D, including joint public/private sector grants and loan guarantees for demonstration projects, deployment and manufacturing incentives, financing support, regulatory changes, job training, transmission and siting/permitting policies - much of which is discussed, admittedly sporadically, on this blog